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HMRC internal manual

Savings and Investment Manual

HM Revenue & Customs
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Annual payments: anti-avoidance

Annual payments made for dividends or non-taxable consideration

ITA07/S904 (originally ICTA88/S125) is intended to counter schemes which are designed to produce tax relief to the payer of an annuity or other annual payment where, in effect, he gets his money back in the form of consideration which is wholly or partly non-taxable in his hands. Payments caught by this anti-avoidance legislation are

  • to be made without deduction of income tax, and
  • not allowable as deductions in computing a person’s income (ITA07/S843).

The rules are likely to apply mainly to payments made by corporate taxpayers. See the Corporate Finance Manual for further details (SAIM20000).